Edited version of private advice

Authorisation Number: 1051930251027

Date of advice: 7 December 2021

Ruling

Subject: Crisis benefit insurance payment

Question 1

Is the Crisis Lump Sum Benefit payment assessable under section 6-5 or section 15-2 of the Income Tax Assessment 1997 (ITAA 1997)?

Answer

No. The Crisis Lump Sum Benefit payment you received under the Policy is not ordinary income under the ordinary concepts and will not be assessable under section 6-5 of the ITAA 1997. Additionally, the Crisis Lump Sum Benefit payment is not related to your employment remuneration and is therefore not assessable under section 15-2 of the ITAA 1997.

Therefore, the Crisis Lump Sum Benefit payment will be assessable under the capital gains tax provisions.

Question 2

Is the Crisis Lump Sum Benefit Payment exempt from capital gains tax under section 118-37 of the ITAA 1997?

Answer

Yes. The Crisis Lump Sum Benefit payment was received by you as compensation for a specific injury covered under the Policy. The Crisis Lump Sum Benefit payment is capital in nature, however any capital gain or capital loss in relation to it is disregarded under section 118-37 of the ITAA 1997 as it was received as a result of an illness that you personally suffered.

This ruling applies for the following period:

Income year ending 30 June 20XX.

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an employee of Company X who is the owner of an insurance policy (the Policy).

The Policy:

•         provides salary continuance insurance cover for specified employees

•         is provided by Company X at no cost to its employees to ensure that they receive an income if they are off work for an extended period of time because of sickness, injury or trauma

•         includes other features and benefits, such as crisis benefits for specified medical conditions; and

•         is provided through the current insurer, Company Z.

You are an insured person and beneficial holder of the Policy.

You had a medical incident which required medical treatment. You did not work for the rest of the ruling period.

You lodged a crisis benefit claim under the Policy for your specific medical issue with Company Z.

Your claim was accepted by Company Z who made the Crisis Lump Sum Benefit payment to Company X on your behalf.

You had continued to receive your salary from Company X during the period covered by the Crisis Lump Sum Benefit payment, and you continue to be an ongoing employee of Company X.

Separate to the Crisis Lump Sum Benefit payment, you also received income protection payments under the Policy several months after you had received the Crisis Lump Sum Benefit payment.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 6-15

Income Tax Assessment Act 1997 Section 15-2

Income Tax Assessment Act 1997 Section 102-5

Income Tax Assessment Act 1997 Section 118-37